The purpose of this post is to share the consumer protection laws that you and your spouse should be aware of, and how they protect you and your family.
I will explain the purpose and highlights of each law and provide an example situation in which the law would protect consumers.
Table of Contents
I realize this post was supposed to be about five consumer protection laws that every married couple should be aware of, but I need to slip in a sixth.
Equal Credit Opportunity Act
Purpose: To eliminate discrimination in lending
The purpose of the Equal Credit Opportunity Act (ECOA) is to protect against discrimination based on race/color, religion, national origin, sex, marital status, age, and public assistance status.
It prevents the refusal of credit, discouraging borrowers, among other protections.
Creditors must provide a reason for rejecting the application within 60 days.
The Equal Credit Opportunity Act in Action
Background:
Jane, a 37-year-old single mother and recent divorcee, is eager to establish her financial identity and provide a stable home for her two children. After years of managing the household finances jointly with her spouse, she's ready to build her credit independently. Jane works as a school administrator and has a stable income.
Challenge:
Jane decides to apply for a car loan to accommodate her family's needs better. She fills out the application with her local credit union, providing details about her income, employment, and financial history. However, her application is unexpectedly denied despite her good credit score and sufficient income to manage the loan payments.
Discovery:
Confused and frustrated, Jane contacts the credit union for an explanation. According to the Equal Credit Opportunity Act, creditors must provide a reason for rejecting the application within 60 days.
They informed her that the denial was based on her recent divorce and the assumption that she might struggle financially as a single parent. This reason strikes Jane as unfair and discriminatory, potentially based on her marital status and gender, which could violate the Equal Credit Opportunity Act (ECOA).
Action:
Determined to challenge the decision, Jane researches the ECOA and learns that it prohibits discrimination against applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant is old enough to enter into a contract).
Realizing that her rights may have been violated, Jane filed a complaint with the Federal Trade Commission (FTC) and consulted with a consumer rights attorney to discuss her options. The attorney confirms that Jane's situation is a clear discrimination case under the ECOA.
Resolution:
With the attorney's help, Jane formally challenges the credit union's decision. The credit union has been prompted to review her application and the reasons for her denial. After reconsideration, acknowledging their error and the violation of the ECOA, the credit union approves Jane's car loan. Additionally, they agree to undergo a review of their loan approval processes to ensure compliance with ECOA regulations.
Conclusion:
Jane’s experience underscores the importance of being aware of one's rights under laws like the ECOA. Her willingness to stand up for her rights corrected an unjust situation.
Truth in Lending Act
Purpose: To ensure consumers make fully informed credit decisions.
The Truth in Lending Act requires terms and conditions to be provided in writing. The Schumer Box is a great example of this disclosure.
Of note is the three-day right of rescission for refinancing a home but not buying one.
The Truth in Lending Act in Action
Background:
Emma, a 28-year-old graphic designer, decides to buy her first home. After saving diligently for years, she's ready to navigate the complex world of mortgages. She spots a great offer online, advertising an exceptionally low interest rate, and decides to apply.
Challenge:
The lender provides Emma with an initial quote that details a very attractive interest rate and minimal fees. Thrilled with the offer, Emma is ready to commit, but something about the lack of details regarding the loan's terms and total cost nags at her. She remembers reading about various consumer protection laws in a finance blog.
Discovery:
Upon further investigation, Emma learns about the Truth in Lending Act (TILA), which requires lenders to provide complete disclosure of all terms of a credit arrangement and all costs—including the annual percentage rate (APR), term of the loan, and total costs to the borrower—before any agreement is signed.
Motivated by this information, Emma requests the full disclosure statement from her lender. She discovered that the loan included a higher APR than initially quoted and that significant fees were not clearly outlined in the initial discussions.
Action:
Realizing the discrepancy, Emma confronts her lender, citing the TILA requirements. The lender attempts to dismiss her concerns, suggesting these terms are standard for such competitive rates. Undeterred, Emma threatens to report the lender to the Consumer Financial Protection Bureau (CFPB) for non-compliance with TILA.
Resolution:
Faced with potential legal action and negative publicity, the lender revises the terms and provides a new, transparent disclosure statement that accurately reflects all costs and terms. This new statement offers a slightly higher rate but is free of hidden fees, providing a clearer picture of what Emma would truly pay.
Emma decides to shop around with other lenders but feels empowered knowing exactly what questions to ask and what disclosures to expect. This ensures she gets the best possible deal without any hidden surprises.
Conclusion:
Emma's experience highlights the importance of the Truth in Lending Act in protecting consumers from deceptive lending practices. By enforcing transparency, TILA helps consumers make informed decisions about credit.
Fair Credit Billing Act
Purpose: Clarifies the billing dispute process.
The purpose of the Fair Credit Bill Act is to clarify the billing dispute process.
The dispute must be in writing within 60 days
The creditor has 30 days to respond and 90 days to resolve
The borrower does not have to pay the amount in dispute, but the amount not under dispute must be paid
The creditor must refund overpayments
Payments must be applied right away, if not, they cannot be applied with a penalty
The Fair Credit Billing Act in Action
Background:
Tom, a 35-year-old software engineer, regularly reviews his credit card statements to ensure all transactions are accurate. During one of his monthly reviews, he notices several unfamiliar charges totaling over $500. These charges include a subscription service he canceled months ago and a double charge from an online electronics store.
Challenge:
Concerned about these discrepancies, Tom contacts his credit card company to dispute the charges. Initially, the customer service representative tells him that the charges have already been processed and implies that there's little that can be done. Tom recalls hearing about consumer rights related to billing errors and decides to investigate further.
Discovery:
Tom learns about the Fair Credit Billing Act (FCBA), which protects consumers against unfair billing practices. This federal law allows consumers to formally dispute billing errors directly with their credit card issuer and provides a structured process for resolution.
Key protections include disputes about unauthorized charges, charges for goods and services not received, charges for canceled subscriptions, and charges with incorrect dates or amounts.
Action:
Empowered with this knowledge, Tom writes a formal dispute letter to his credit card issuer, citing the FCBA. He includes all necessary documentation, such as his cancellation confirmation for the subscription service and receipts showing the correct amount charged by the electronics store. He sends the letter via certified mail, ensuring that there is a record of its receipt.
Resolution:
The credit card company acknowledges Tom’s dispute and launches an investigation. Within the 90-day period required by the FCBA, they concluded that the charges were indeed errors.
They reverse the charges and apologize for the inconvenience, assuring Tom that additional checks will be put in place to prevent similar issues.
Conclusion:
Tom’s experience demonstrates the effectiveness of the FCBA in protecting consumers from billing errors. His proactive approach not only corrected the errors but also helped ensure that the credit card company improved its processes.
Credit CARD Act
Purpose: To protect consumers against unfair fees and interest rate increases; standardizes credit terms
The purpose of the Credit CARD Act [Credit Card Accountability Responsibility Disclosure Act] is to protect consumers against unfair fees and interest rate increases. The act also standardizes credit terms.
Limits amount and frequency of fees (Subprime fees must be paid upfront, and there can be no inactivity fees for 12 months)
Payments go to the highest-interest debt first, cannot be due before 5:00 p.m., must have consistent due dates, and bills must state how long it will take to pay a debt off by only making the minimum payment. The act also limits credit card access to those under 21.
The Credit CARD Act in Action
Background:
Sara, a 42-year-old teacher, has been responsibly managing her finances by using her credit card for everyday expenses. When the local school district faces budget cuts, Sara's hours are reduced, significantly impacting her income. She worries about her increased credit card balance and how she'll manage the interest and fees.
Challenge:
As Sara reviews her latest credit card statement, she notices an increase in her interest rate and a late fee applied after she missed her payment due date by just one day. With her reduced income, every dollar counts, and these changes could spiral her further into debt.
Discovery:
Sara remembers hearing about the Credit CARD Act of 2009, designed to protect consumers against unfair credit card practices. The act requires issuers to provide a 45-day notice before increasing interest rates and mandates clear disclosure of terms.
Furthermore, it restricts issuers from charging excessive fees and increases transparency regarding how long it would take to pay off the balance when only making minimum payments.
Action:
Feeling empowered, Sara contacted her credit card issuer to discuss her situation. She mentioned the Credit CARD Act and asked about the interest rate increase and the late fee. She requests a review of her account under the protections afforded by the act, including any possibilities for adjusting her payment due dates and waiving late fees during her period of financial hardship.
Resolution:
The credit card company reviews her account and acknowledges that the increased interest rate notification was not sent 45 days in advance as required by the CARD Act. They reverted the rate to its previous level and agreed to waive the late fee as a one-time courtesy.
Additionally, they offer Sara enrollment in a hardship program that lowers her interest rate for a period, giving her time to adjust her financial situation.
Conclusion:
Sara's experience illustrates the importance of understanding and using the protections provided by the Credit CARD Act. Her proactive approach allowed her to manage her debt more effectively and avoid falling deeper into financial difficulty.
Fair & Accurate Credit Transaction Act
Purpose: Identity theft and credit protection for consumers
The purpose of the FACT Act is to provide identity theft and credit protection for consumers. Under the act, consumers have a right to a free copy of their credit report from each company each year. It also requires receipts to be limited to the last 5 digits of the credit card and for credit reporting agencies to work with to support victims of identity theft.
Importantly, it requires lends and credit to take action even if the victim does not know a crime has occurred.
The Fair and Accurate Transaction Act in Action
Background:
Linda, a 45-year-old retail manager, has always been cautious about her personal information, especially in an era of increasing online transactions. She regularly checks her credit report to ensure all information is accurate and up-to-date.
Challenge:
During one of her routine checks, Linda discovers several unfamiliar accounts and unauthorized inquiries on her credit report. Concerned about potential identity theft, she recalls reading about consumer protection laws that might help in situations like this.
Discovery:
Linda researches and learns about the Fair and Accurate Credit Transactions Act (FACTA), part of the federal Fair Credit Reporting Act that aims to help consumers protect themselves against identity theft.
FACTA grants consumers the right to request one free credit report annually from each of the major credit reporting agencies. It also includes provisions for fraud alerts and active duty alerts to protect consumers who suspect they might be or could become victims of fraud.
Action:
Using her rights under FACTA, Linda places a fraud alert on her credit profile, which requires creditors to take extra steps to verify her identity before opening any new accounts. She also utilizes her right under FACTA to request free copies of her credit report from all major agencies to review them for any other discrepancies.
While reviewing her reports, Linda gathered documentation and filed a dispute over the unauthorized entries directly with the credit reporting agencies. She provides evidence such as her ID, statements, legitimate accounts, and transaction records.
Resolution:
The credit reporting agencies investigate Linda's dispute, a process mandated by FACTA to be completed within 30 days. They confirmed that the suspicious accounts resulted from identity theft and proceeded to remove these entries from her credit report. They also provide Linda with additional advice on how to secure her information and prevent future occurrences of fraud.
Conclusion:
Linda's proactive measures, supported by FACTA, not only rectified her credit report but also strengthened her defenses against identity theft. Her story illustrates the importance of regularly checking credit reports and knowing how to utilize legal protections effectively.
Related: Fraud Prevention Quiz: 17 Questions and Answers to Help Protect Your Family from Online Scams
Fair Debt Collections Practice Act
Purpose: To protect the consumer in third-party debt collections.
The purpose of the Fair Debt Collections Practice Act [FDCPA] is to protect the consumer in third party debt collections by prohibiting the following:
Telling a third-party that a person owes money
Contact at work if not allowed personal calls
Calls at “inconvenient times”
Threats, insults, and harassment
Lying
Collecting money that is not owed
What consumers can do:
Stop contact from debt collector
Other other contact allowed is summons for court case
It requires the collection agent to send a debt verification notice that includes information about debts owed. If the debtor does not respond, the debt is assumed to be valid.
The Fair Debt Protections Act in Action
Background:
Michael, a 30-year-old freelance photographer, experiences a slow phase in his career and struggles to keep up with his mounting debts, including a significant credit card debt. As he tries to navigate these financial challenges, he receives calls from a debt collection agency.
Challenge:
The debt collectors are aggressive, calling Michael multiple times a day, including early mornings and late evenings. They also start calling his family and friends, disclosing his debt situation and causing him embarrassment and stress. One collector even threatens legal action and wage garnishment, adding to Michael's anxiety.
Discovery:
Feeling harassed and cornered, Michael decides to research his rights and discovers the Fair Debt Collection Practices Act (FDCPA), which sets strict guidelines on how debt collectors can conduct themselves.
The FDCPA prohibits debt collectors from using abusive, unfair, or deceptive practices. This includes restrictions on the times they can call (not before 8 a.m. or after 9 p.m.), bans on discussing the debt with third parties, and prohibits threats of actions they cannot legally take.
Action:
Empowered by this knowledge, Michael documents the times and content of the calls, collecting evidence of the violations. He writes a formal letter to the debt collection agency, citing the specific breaches of the FDCPA and demanding that they cease their illegal tactics. He also informs them that he knows his rights and will not hesitate to take legal action if the harassment does not stop.
Resolution:
The debt collection agency reviews the complaint and the documented evidence provided by Michael. Realizing they have breached FDCPA regulations, they immediately instruct their agents to adhere strictly to legal practices. The agency also sends Michael a written apology and agrees to communicate only in writing, which is Michael’s preferred method of communication as outlined in his rights under the FDCPA.
Conclusion:
Michael’s story shows how understanding and asserting one’s rights under the Fair Debt Collection Practices Act can significantly alter interactions with debt collectors. By standing up for his rights, Michael not only stops the harassment but also regains control over his financial situation in a dignified and lawful manner.
Fair Credit Reporting Act
Purpose: To promote accuracy and privacy in credit reports.
The purpose of the Fair Credit Report Act is to promote accuracy and privacy in credit reports by allowing for or requiring the following:
Consumers can dispute information on credit reports, requiring credit agencies to respond within 30 days.
Third parties can only access your credit if they have a valid need.
Consumers can get a free credit score if turned down for a loan.
Negative information is removed from your credit report after 7 years, except for Chapter 7 bankruptcies (10 years).
It allows for a free copy of your credit report if you are a victim of identity theft, have been denied credit, or are unemployed.
The Fair Credit Reporting Act in Action
Background:
Eric, a 38-year-old engineer, is preparing to apply for a mortgage to buy his first home. Knowing that his credit score is crucial for securing a good interest rate, he orders credit reports from all three major credit reporting agencies to ensure that all his information is correct and up to date.
Challenge:
Upon reviewing his credit reports, Eric is shocked to find several errors. One report mistakenly lists a delinquent payment on a credit card account that Eric had closed years ago. Another report incorrectly shows a car loan as outstanding, even though Eric had paid it off over six months prior.
Discovery:
Concerned about how these errors could affect his mortgage application, Eric researched his rights under the Fair Credit Reporting Act (FCRA), which ensures the accuracy, fairness, and privacy of information in consumer reporting agencies' files.
Action:
Eric takes action by writing formal dispute letters to each credit reporting agency that listed the errors, as allowed under the FCRA. In his letters, he clearly identifies each error, provides copies of documents supporting his claims (such as account closure confirmations and loan payoff statements), and requests that the inaccuracies be removed or corrected.
He sends these letters via certified mail, ensuring that he has proof of delivery and that the agencies are obligated to investigate within 30 days.
Resolution:
The credit reporting agencies conduct their investigations and verify that the errors Eric pointed out are indeed mistakes. They updated his credit reports to reflect the correct information: the credit card account shows as closed with no delinquency, and the car loan is marked as paid in full.
Eric also receives updated copies of his credit reports for free, which now reflect an improved credit score due to the corrections made.
Conclusion:
Eric’s diligence in checking his credit reports and using the protections offered by the FCRA ensured that he could proceed with his mortgage application without being penalized for reporting errors. His case highlights the importance of consumers regularly reviewing their credit reports and knowing how to correct errors.
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